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Surety bonds are assumed to carry zero risk for the surety company. The bond outlines the terms between the principal, surety company, and obligee, but doesn't include reimbursement language for the principal. To confidently issue surety bonds without suffering loss, an indemnity agreement is used. This agreement transfers risk from the indemnitor (principal) to the indemnity (surety company). In a surety bond indemnity agreement, the indemnitor assumes the risk while the surety company is absolved of liability.
